HC Deb 18 June 1956 vol 554 cc1175-85

The following subsection shall be substituted for subsection (1) of section three hundred and eighty-five of the Income Tax Act, 1952 (which excludes relief in respect of contributions to the House of Commons Members' Fund):— (1) The salary of a member of the House of Commons shall for all the purposes of the Income Tax Acts be treated as reduced by the amounts deducted in pursuance of section one of the House of Commons Members' Fund Act, 1939; but a member shall not by reason of any such deduction be entitled to relief under any other provision of this Act. In this subsection the reference to salary shall be construed as mentioned in subsection (3) of the said section one, the reference to amounts deducted includes a reference to amounts required to be set aside under that subsection, and ' deduction ' shall be construed accordingly".—[Mr. H. Brooke.]

Brought up, and read the First time.

Mr. H. Brooke

I beg to move, That the Clause be read a Second time.

It will be within the recollection of some of us that when the House of Cornmons Members' Fund was set up in 1939 it gave rise, strangely enough, to an all-night sitting. Since then, the existence and the value of the Fund has, I think, been universally recognised. But it is a fact that when the Fund was created 17 years ago, specific provision was made in the Act that the compulsory deduction of El 2 from Members' pay should not rank for tax relief. My right hon. Friend has reconsidered this and thinks that the time has come to remove what is, in effect, a discrimination against Members of Parliament.

It is now the general practice that when people have compulsory deductions made from their salaries for the purposes of a pension fund, these deductions shall rank for tax relief. The object of this Clause is to bring the treatment of Members of Parliament in that respect into line with that of the rest of the citizens of this country. This Clause will allow the contributions as deductions from Members' salaries for tax purposes, thus treating them as allowable expenses. Of course, if the whole of the salary is absorbed in expenses that do rank for tax relief, it will be impossible, and contrary to all precedent, to allow the excess expenses to be deducted from other income for tax purposes, so the Clause does not provide for that.

I should make clear that the final paragraph of the Clause covers the position of Ministers who are treated in the same way as other hon. Members in this respect. It also covers the exceptional case of the hon. Member who declines to draw a salary.

Mr. John Rankin (Glasgow, Govan)

Who is he?

Mr. Brooke

Any hon. Member who declines to draw a salary, so this will apply to the hon. Member for Govan (Mr. R ankin)—

Mr. Rankin

Who does not draw enough.

Mr. Brooke

— should he align himself with the others.

Such hon. Members, needless to say, are in a special position because they cannot be charged tax on income which they are not receiving. In fact, the position of these people is safeguarded by the Clause. My right hon. Friend is not putting this proposition before the Committee under any impression that it is a solution of the problem regarding the pay of hon. Members, but rather because he believes that it will be generally acceptable that a discrimination in the tax law against Members of Parliament as such should now be removed.

Mr. H. Wilson

This new Clause is utterly derisory, and I doubt whether the Committee will want to spend a great deal of time discussing it. If it is any comfort to the Government, I can inform them that I, for one, do not propose to advise my hon. Friends to vote against it. But in fact it is something which we on this side of the Committee regard as an extremely small and insignificant proposal.

What the right hon. Gentleman failed to make clear in his few words of introduction was that this is not a pension fund, as is normally understood by that phrase. There is no Government contribution. In fact it is a mutual-aid arrange-gent which makes payments subject to an extremely strict and indeed harsh means test. Therefore I hope that none of the newspapers or organs of public comment will suggest that this new Clause in any way makes any difference to the situation at all.

The right hon. Gentleman, I think, recognised that it does not begin to meet the broader problem which, as he knows, is still facing this House. I think it ought to be made clear to the right hon. Gentleman and the Committee that, small though this concession is—if one can use the word "concession"—it is, like so many concessions from the Government, of a kind which is no help at all to those who need it most. Those who need help are not in a position to pay Income Tax, but it gives the greatest assistance to the richest Members who are paying Surtax. I hope that the right hon. Gentleman will not be disappointed in finding that we greet the proposal with a singular lack of enthusiasm.

Mr. Glenvil Hall

I agree with what has been said by my right hon. Friend the Member for Huyton (Mr. H. Wilson) about this being a completely derisory suggestion. In a sense it is an insult to the House to bring it forward.

What the right hon. Gentleman did not tell the Committee was that he, with some of the rest of us, sat on a Select Committee which made inquiries into the situation of Members of Parliament and the salary which they receive, and that the Committee came to certain conclusions and made certain recommendations. The Government have not seen fit to implement those recommendations, although the Select Committee was unanimous. Now at long last we get this suggestion that Members are to get relief from Income Tax on the payments which they make to the Members' Fund. What also the right hon. Gentleman did not tell the Committee and what I hope he will tell us before we pass to the next Clause, is what this is going to cost the Treasury. I think that the utmost an hon. Member can get out of it is about £5 a year.

Nor has the right hon. Gentleman told us, but it would be interesting to know, why the Government have changed their minds on this matter. In common with many other present hon. Members, I was in the House when the Act of 1939 was presented and passed. The Prime Minister of that day, Mr. Neville Chamberlain, put forward cogent reasons why the payments made by Members should not rank for tax deduction. Something has happened since then and I, for one, should like to know what it is which has made the Government at long last change their minds.

Will the right hon. Gentleman, therefore, be good enough, before we pass on, to tell us just what has happened to make the Government change their view, and what this change will cost the Treasury?

Mr. F. H. Hayman (Falmouth and Camborne)

I think that the Government ought to realise that most of us on this side of the Committee regard this concession as an insult to self-respecting Members of Parliament. When the Financial Secretary replies, perhaps he will tell us how many Members of Parliament refuse to take their salary and how many have expenses which are equal to the salary.

10.15 p.m.

Mr. Hale

So far as I know, there are four categories of people who will be affected by this somewhat derisory amendment, as my right hon. Friend the Member for Huyton (Mr. H. Wilson) has described it. A large number of Members of Parliament do not now pay Income Tax at all. They have to live on a net income which does not make them liable to tax. Therefore a large number of Members of Parliament will get no benefit from this provision because their expenses are already such that their net income does not make them liable to tax. The situation of those hon. Members is deplorable indeed. I hope that that matter may be discussed on a more appropriate occasion, as I do not wish to discuss it further tonight.

There are also hon. Members in my position who have some income of their own. Mine happens to be a quarter of what it was four years ago because I gave up a position as a consultant in order to spend my time here. Some of those hon. Members already spend the whole of their Parliamentary income in expenses, and will therefore receive no benefit. There are Members who do pay tax and who will get a total benefit of approximately £5 a year. There are Members who pay a very high rate of tax, who will, with the operation of Surtax, get a benefit which may approximate to £8 or £9. Even in this little matter we see that the wealthier person will benefit and the poorer one will not.

The Financial Secretary, in introducing this new Clause, said it was undesirable that there should be discrimination against Members of Parliament, and that it had been decided, therefore, to bring the law into conformity and not discriminate in this respect. If that be so, then there are other examples of discrimination with which I would ask the Financial Secretary to deal in the course of the debate.

When I was practising as a solicitor, I found, to my surprise, that Members of Parliament are not supposed, by the tax authorities, to read. No deduction can be made from the income of a Member of Parliament for any book he buys, for instance a reference book, to assist him in the course of his duties. On the other hand, if I care to charge those reference books against my profits as a solicitor, that is allowed without question and without complaint. I can buy a book on statute law and charge it to my professional income, if I have one; but a Member of Parliament is not allowed to do so. I do not propose to elaborate this point, but as the Financial Secretary did raise the matter of discrimination, I think I am entitled to mention these matters.

If I practise as a solicitor, I can bring a client to the Dining Room of the House of Commons and charge the cost of the meal to my professional salary. If the mayor and corporation of Oldham send a deputation to the House to discuss important matters affecting the corporation, and I give them such modest hospitality as my limited means permit, I am not entitled a penny tax relief on my income. Every Member knows that it is essential today, if he is to keep his position, for him to spend a great deal on providing hospitality.

Any businessman can hire a room here now, on a Friday, Saturday or Sunday, advertise the dinner as at the House of Commons, collect two or three hundred people, and charge every penny of that expense to tax. And they do. Indeed, the Chairman of the Kitchen Committee has almost boasted that he has managed to offset a little loss by this somewhat dubious means. What the loss is to the Treasury has not been taken into account in that balance.

I ask the Financial Secretary to deal with some of these quite serious matters. Members of Parliament have been subjected for some years to a kind of discrimination which is not applied, so far as I know, to any other person whatever. None of us is happy to get up in this Committee and raise these matters. I do not propose to raise the general issue, but so far as that general issue is concerned, I have never had the slightest hesitation in speaking in Oldham and saying that, for my part, I would vote for a very substantial increase in salaries for Members of Parliament, and that, in my view, the services which I give are worth it. I spent the whole of yesterday giving advice to a great many constituents, advice for which, when I was in practice, I would have been able to charge very large fees.

The Deputy-Chairman

rose

Mr. Hale

I agree, Sir Rhys, that I ought not to develop that point now, and I shall say no more about it.

I have raised those specific points, and I would ask the Financial Secretary to consider these items of discrimination to see whether he can, at least, take some measures which, though they may not be of great assistance to those who are hard up and who cannot even give hospitality or buy books, would afford a measure of justice to hon. Members which ought to be applied.

Mr. H. Brooke

I would be quickly called to order, Sir Rhys, if I were to dilate at length on the difference between the treatment of expenses under Schedule D and Schedule E, which was the fundamental matter which the hon. Member for Oldham, West (Mr. Hale) was raising.

Hon. Members pay tax under Schedule E, and I assure the hon. Member and the Committee that a Member of the House is treated for tax relief purposes in exactly the same way as all other citizens of the country who pay under Schedule E. That is the essential point. Since I became Financial Secretary to the Tresaury, I have initiated something which, I hope is helpful to hon. Members in that I have made arrangements for a new and up-to-date statement to be sent round by the Inland Revenue to all hon. Members when they are invited to fill up their tax relief claim form so that they may know exactly where they stand and exactly under what headings and for what items they are entitled under the law to claim tax relief. What I cannot do, however sympathetic I am in certain directions, is to extend to hon. Members tax relief which is not available to the rest of the citizens of the country.

The right hon. Member for Colne Valley (Mr. Glenvil Hall) inquired what had occurred between 1939 and now. I implicitly answered that question in my first speech. When the House of Commons Members' Fund Act was passed in 1939, it was a subject of hot controversy, both inside the House and, I believe, outside. It was felt by those who were responsible at that time that there should be no tax relief in respect of the contributions lest it be said that the Exchequer was subsidising the pen- sions of hon. Members. Since then, I am thankful to say, the Members' Fund has passed far beyond the confines of controversy and, as far as I am aware, partly due to the admirable way in which the Trustees have administered the Fund, it is accepted by everybody, in the House and outside, as a wisely-conceived and wisely-conducted benevolent fund.

That being so, it would seem anomalous that hon. Members should not be entitled to tax relief on the compulsory payments which they make to it when at the present time people outside the House are widely eligible for tax relief in respect of compulsory deductions that they suffer from their salaries towards a pension fund. That is what has happened and that is what has led my right hon. Friend to put this Clause before the Committee.

Mr. H. Wilson

The right hon. Gentleman is drawing a red herring across the trail with that kind of speech. First, will he answer the question of my right hon. Friend, who asked what would be the cost to the Treasury. Secondly, with these assertions which he has made about Schedule E—we should be out of order in going into that in any detail—the right hon. Gentleman has tried to convey the impression that any suggestions that this is a derisory offer are based on a desire that Members of the House should be paid or treated more favourably than people outside. That was the impression that the right hon. Gentleman sought to create.

If, as the right hon. Gentleman has said —and this has been so for a long time—Members of the House are caught under Schedule E, that means that we are employed persons. Of whom are we the employees? Is it the Treasury? If we are employed persons for the purpose of Schedule E, will the right hon. Gentleman explain why, for the purposes of National Insurance, we are self-employed persons?

The Deputy-Chairman

The right hon. Gentleman would not be in order if he replied to that.

Mr. Wilson

I was bringing my remarks to a conclusion, Sir Rhys, for, as I said, no one wants to spend much time on this proposal of the Government; but surely, since we are discussing the question of the Members' Fund, which is not a pension fund, the question of whether we are employed persons is relevant.

If Members of Parliament were treated as employed persons under the National Insurance Act, the Government would be paying £13,000 a year as their contribution on behalf of the Members. Are we self-employed as Members of the House or are we employed, or do we get the worst of both worlds and remain classed as self-employed for the purposes of National Insurance and employed persons for the purposes of Schedule E? Can we have an answer to this?

Mr. H. Brooke

I hope the right hon. Gentleman will not imagine that I am running away from questions. I had not finished my speech. I thought he wished to interrupt me, and that was why I sat down—to make way for him. As to the cost of this, the total produce of the £12 per annum deducted is about £7,500 per year. The amount of tax charged obviously depends in any year on the amount of tax to which each of the 630 hon. Members happens to be liable. The maximum amount taxable is £7,500. The amount of tax is likely to be rather less than half that sum. So the magnitude of the amount involved is, by comparison with most of the figures we deal with here, very small.

If I may reply, without getting out of order, to the right hon. Gentleman's second question, I would say that the fact that one is taxed under Schedule E does not prove one is an employed person or has an employer, because the clergy are taxed under Schedule E but they have no employer.

Mr. F. Beswick (Uxbridge)

Another question put by my right hon. Friend has not been answered. He asked how it was the Goverment had second thoughts on this matter. Why have they brought forward this insulting Clause? The Financial Secretary said there were changes as between 1939 and now, but what we want to know is, what has been the change since the time when the Bill was introduced in April this year and this week. What representations have been made to the Chancellor? Why has this insulting new Clause been introduced as an after- thought? What great events have occurred in recent weeks to justify it? Can we have an answer to that?

Mr. Brooke

The answer is, because it seemed right to my right hon. Friend to propose this. We are just about to come to another new Clause, and the same question could as well be asked on that.

Clause read a Second time and added to the Bill.

Mr. H. Wilson

I beg to move, That the Chairman do report Progress and ask leave to sit again.

I move this Motion to get from the Chancellor a statement on how long he intends the Committee to sit, and on how far he expects to get with the Bill, tonight. The Chancellor will have noticed that we have got through the 36 Clauses of the Bill in a remarkably short period—five days of Parliamentary time. The Lord Privy Seal will recall our experience last autumn, when it took us more than five days to get through one Clause of his Bill. I am not suggesting this Bill is very much better than that, but it is no worse, and it has gone through remarkably quickly. Would the Chancellor kindly tell us how much farther he hopes to get tonight?

Mr. H. Macmillan

We have had a full day on only one subject, but we have polished off what remained of the Clauses, and now we have just started on the new Clauses. I think that, perhaps, the Committee may be prepared to take the next new Clause. It is of a rather technical character, and the Solicitor-General will be in charge of it. After that, I suggest, we should move to report Progress. I think that should not be more than a short time away. That course would enable us to start on the other new Clauses in good time on resuming tomorrow.

Mr. Wilson

On the assumption that the next new Clause is not very controversial, for I think it does not raise any issue which will detain the Committee very long, I think it is quite reasonable that the Chancellor should attempt to get it before we seek to report Progress. I beg to ask leave to withdraw the Motion.

Motion, by leave, withdrawn.